Fixed Mortgage Terms to Lower


Interest rates play a pivotal role in the housing market and the broader economy. The recent decision by the Royal Bank of Canada (RBC) to lower its interest rate for the five-year fixed-term mortgage has made waves in the financial sector. This article seeks to provide a comprehensive analysis of this decision, the context in which it was made, and its anticipated implications for homeowners and potential borrowers.

Unpacking the Rate Cut

The Royal Bank of Canada, one of the country’s most esteemed financial institutions, announced a significant reduction in its five-year fixed-term mortgage rate. The rate was trimmed by .15%, bringing it down from 3.89% to 3.74%. While this might seem like a small change on the surface, it has profound implications, especially when viewed through the lens of long-term mortgage repayments.

The Driving Force: Canadian Bond Yield Declines

Understanding the dynamics of interest rate adjustments necessitates a closer look at the larger financial landscape. Over the past two months, the Canadian bond yield has witnessed a decline of over 50 basis points. Bond yields are a crucial component in determining banks’ borrowing costs. As these yields decline, the cost of securing funds for banks drops, allowing them to potentially pass on the savings to consumers in the form of lower interest rates.

Anticipated Ripple Effects in the Banking Sector

RBC’s decision is not just consequential for its existing and prospective customers. Given its stature in the Canadian banking sector, such a move is likely to be a bellwether, prompting other major banks to reconsider their own rates. In a competitive financial marketplace, no major bank would want to be left behind, especially when there is clear evidence, like the bond yield shift, supporting a rate change.

A Boon for Borrowers: Real-world Savings

To provide a tangible perspective on the rate cut: consider a $400,000 mortgage. The .15% rate reduction would translate to savings of approximately $30 per month. While this might appear modest in the short term, over the course of a five-year term, it amounts to a saving of $1,800. This is not an insignificant amount, especially for households juggling multiple financial commitments.

The Broader Implication for the Canadian Housing Market

Interest rates are one of the pillars determining the health and vibrancy of the housing market. Lower rates can potentially boost housing demand, as mortgages become more affordable for the average consumer. Additionally, existing homeowners might be tempted to refinance their mortgages to capitalize on the favorable rate environment. While one rate change won’t overhaul the market overnight, it’s a step towards fostering positive sentiment among homebuyers and investors.


Last week the Royal Bank of Canada (RBC) announced that they were lowering the interest rate of their five-year fixed-term mortgage. The rate drop went from 3.89% to 3.74% which represents a .15% cut. This is a result of the Canadian bond yield falling over 50 basis points over the past two months.

This move is likely to prompt similar actions by other major banks in the coming days and has been overdue based on what’s happening in the bond market. A drop like this would save about $30 per month on a $400,000 mortgage.

If you have any further questions about rates and mortgage terms, please don’t hesitate to reach out via email ( or give us a call at 604-588-4466

The Expert Mortgage Brokers of the Coastal Key Team.